Daily Market Update for 3/31
Trend lines drawn from the 3/5 low (19d), 3/25 (5d) and today 3/31 (1d).
Ideas always welcome in the comments. Errors will be amended as comments on TradingView or corrected inline in my blog.
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Wednesday, March 31, 2021
Facts: +1.54%, Volume higher, Closing range: 62%, Body: +60%
Good: Higher high, lower low, back above the 21d EMA
Bad: Fade at the end of the day created long upper wick
Highs/Lows: Higher high, higher low
Candle: Thick green body with n lower wick, long upper wick
Advance/Decline: More advancing stocks than declining stocks
Indexes: SPX (+0.36%), DJI (-0.26%), RUT (+1.13%), VIX (-1.07%)
Sectors: Technology (XLK +1.59%) and Consumer Discretionary (XLY +0.78%) were top. Energy (XLE -0.69%) and Financials (XLF -0.76%) were bottom.
Expectation: Sideways or Higher
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Market Overview
The breakout that wasn't. News from Microsoft drove a mid-afternoon buying frenzy that was visible in the Microsoft intraday chart and big enough to show up in both the Nasdaq and S&P 500 charts. However, the breakout quickly faded and took the indexes with it to close away from intraday highs. Still there were good gains in the market thanks to a bullish morning on positive economic outlook with Biden's announced infrastructure plans.
The Nasdaq closed with a +1.54% gain on higher volume, and gave us the gain with higher confidence we were waiting for. The closing range of 62% is above a 60% body with no lower wick. There is a long upper wick from the dip at the end of the day. There were 1.32 advancing stocks for every declining stock.
The Russell 2000 (RUT) added to the previous day's gains with a +1.13% advance. The S&P 500 (SPX) also advanced, gaining +0.36%. The Dow Jones Industrial average (DJI) was weighed down by Financial and Energy stocks and declined -0.26%.
The VIX volatility index declined -1.07%.
Technology (XLK +1.59%) and Consumer Discretionary (XLY +0.78%) were top sectors for the day. Energy (XLE -0.69%) and Financials (XLF -0.76%) were at the bottom. Interestingly, Materials (XLB -0.49%) and Industrials (XLI -0.32%) declined for the day despite Biden's infrastructure plans. It could be a case of sell the news. Another note is that Utilities (XLU +0.74%) climbed in the last hour from fifth place to third place just behind Consumer Discretionary.
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Economic Indicators
The US Dollar (DXY) climbed -0.07%.
The US 30y treasury bond and 10y and 2y notes yields all gained for the day with the yield curve steepening. The increase in yields was not a surprise given the news on infrastructure investments, so there was less of a negative reaction from the equities market.
High Yield Corporate Bonds (HYG) and Investment Grade Corporate Bond (LQD) prices both advanced.
Silver (SILVER) and Gold (GOLD) both reversed from two days of declines and advanced today. Crude Oil (CRUDEOIL1!) declined. Timber (WOOD) declined. Copper (COPPER1!) advanced and Aluminum (ALI1!) declined.
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Investor Sentiment
The put/call ratio dropped to 0.639. The put/call ratio (PCCE) is a contrarian indicator that shows overly bullish or overly bearish investor behavior. The 0.7 level is considered normal. As it approaches 0.60 (overly bullish) and below, watch for a possible pullback in the market.
The CNN Fear & Greed index is moved back to Neutral. The stock market components of the index are still in the Fear and Extreme Fear categories. Those include price strength, price breadth and Put/Call ratio.
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Market Leaders
All of biggest four mega-caps had gains for the day, but all closed well below intraday highs. Alphabet (GOOGL) and Microsoft (MSFT) closed above the 21d EMA and 50d MA lines. Amazon (AMZN) closed above the 21d EMA. Apple (AAPL) rallied above the 21d EMA but was unable to hold above the line. The higher volume is a positive, but the pull back from the breakout attempt shows some weakness.
Tesla (TSLA), Nvidia (NVDA), Taiwan Semiconductor (TSM) and ASML Holding (ASML) were the top mega-caps of the day. Energy and Financial stocks were at the bottom, including Bank of America (BAC), Exxon Mobil (XOM), and JP Morgan (JPM). Communications companies AT&T (T) and Comcast Corp (CMCSA) were also at the bottom of the list.
Growth stocks popped again today. Leading the list were Chinese fintech companies Up Fintech (TIGR) and FUTU Holdings (FUTU) with +20.94% and 15.20% gains. GrowGeneration (GRWG) and Moderna (MRNA) also had gains of over 10%. 18 of the growth stocks in the daily update list gained over 5%. It's not meant to be an exhaustive list, but the point remains, there were a lot of big gainers today in growth stocks.
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Looking ahead
On Thursday, an OPEC meeting is scheduled which will impact outlook for oil supply/demand. Initial Jobless Claims data will be released. Additional Manufacturing data for March will indicate how the sector is recovering.
Also keep in mind to characteristics for tomorrow. It's the beginning of a new quarter and a historically positive month for markets. It's also the last day of trading this week heading into a three-day weekend.
CarMax (KMX) reports on Thursday.
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Trends, Support and Resistance
The index moved above the 21d EMA in the morning and stayed above that line, despite the dip before close.
If the one-day trend line continues, we can expect a +1.02% gain for Thursday, and ending just under the 50d MA.
The five-day trend line points to a +0.42% gain.
The trend line from the 3/5 low points to a -0.36% loss, which is just below the 21d EMA.
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Wrap-up
It was positive to see a good gain on higher volume today. The longer upper wick is reminiscent of the candle on 3/22 where I called an expectation of Higher for the next day. But the index dropped 3% over the next two days. So that gives me some caution in the expectation of Sideways or Higher for tomorrow.
There are some differences in the underlying characteristics of the 3/22 candle. The breadth in gains was not there for 3/22, with two declining stocks for every advancing stock. Today, we have more advancing stocks than declining stocks. The advances on 3/22 happened as treasury yields declined and investors seemed to be in and out of tech stocks based on the movement in yields. Today's rally in tech stocks happened despite higher yields.
The creation of the longer upper wick was the same, a sell-off into close after an intraday high. The catalyst this time has a few possibilities. Perhaps Yellen's announcement of more scrutiny on hedge funds stirred the market. But the impact of Microsoft's huge afternoon rally and then pullback can also be felt in the indexes. The timing of the rally and sell-off coincides with the rise in the Utilities sector, a sector that investors run to when their nervous.
So I'm bullish with caution for tomorrow. Let's look forward to a great first day of April. And market, don't make a fool out of me.
Stay healthy and trade safe!
Ideas always welcome in the comments. Errors will be amended as comments on TradingView or corrected inline in my blog.
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Wednesday, March 31, 2021
Facts: +1.54%, Volume higher, Closing range: 62%, Body: +60%
Good: Higher high, lower low, back above the 21d EMA
Bad: Fade at the end of the day created long upper wick
Highs/Lows: Higher high, higher low
Candle: Thick green body with n lower wick, long upper wick
Advance/Decline: More advancing stocks than declining stocks
Indexes: SPX (+0.36%), DJI (-0.26%), RUT (+1.13%), VIX (-1.07%)
Sectors: Technology (XLK +1.59%) and Consumer Discretionary (XLY +0.78%) were top. Energy (XLE -0.69%) and Financials (XLF -0.76%) were bottom.
Expectation: Sideways or Higher
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
The breakout that wasn't. News from Microsoft drove a mid-afternoon buying frenzy that was visible in the Microsoft intraday chart and big enough to show up in both the Nasdaq and S&P 500 charts. However, the breakout quickly faded and took the indexes with it to close away from intraday highs. Still there were good gains in the market thanks to a bullish morning on positive economic outlook with Biden's announced infrastructure plans.
The Nasdaq closed with a +1.54% gain on higher volume, and gave us the gain with higher confidence we were waiting for. The closing range of 62% is above a 60% body with no lower wick. There is a long upper wick from the dip at the end of the day. There were 1.32 advancing stocks for every declining stock.
The Russell 2000 (RUT) added to the previous day's gains with a +1.13% advance. The S&P 500 (SPX) also advanced, gaining +0.36%. The Dow Jones Industrial average (DJI) was weighed down by Financial and Energy stocks and declined -0.26%.
The VIX volatility index declined -1.07%.
Technology (XLK +1.59%) and Consumer Discretionary (XLY +0.78%) were top sectors for the day. Energy (XLE -0.69%) and Financials (XLF -0.76%) were at the bottom. Interestingly, Materials (XLB -0.49%) and Industrials (XLI -0.32%) declined for the day despite Biden's infrastructure plans. It could be a case of sell the news. Another note is that Utilities (XLU +0.74%) climbed in the last hour from fifth place to third place just behind Consumer Discretionary.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Economic Indicators
The US Dollar (DXY) climbed -0.07%.
The US 30y treasury bond and 10y and 2y notes yields all gained for the day with the yield curve steepening. The increase in yields was not a surprise given the news on infrastructure investments, so there was less of a negative reaction from the equities market.
High Yield Corporate Bonds (HYG) and Investment Grade Corporate Bond (LQD) prices both advanced.
Silver (SILVER) and Gold (GOLD) both reversed from two days of declines and advanced today. Crude Oil (CRUDEOIL1!) declined. Timber (WOOD) declined. Copper (COPPER1!) advanced and Aluminum (ALI1!) declined.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Investor Sentiment
The put/call ratio dropped to 0.639. The put/call ratio (PCCE) is a contrarian indicator that shows overly bullish or overly bearish investor behavior. The 0.7 level is considered normal. As it approaches 0.60 (overly bullish) and below, watch for a possible pullback in the market.
The CNN Fear & Greed index is moved back to Neutral. The stock market components of the index are still in the Fear and Extreme Fear categories. Those include price strength, price breadth and Put/Call ratio.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
All of biggest four mega-caps had gains for the day, but all closed well below intraday highs. Alphabet (GOOGL) and Microsoft (MSFT) closed above the 21d EMA and 50d MA lines. Amazon (AMZN) closed above the 21d EMA. Apple (AAPL) rallied above the 21d EMA but was unable to hold above the line. The higher volume is a positive, but the pull back from the breakout attempt shows some weakness.
Tesla (TSLA), Nvidia (NVDA), Taiwan Semiconductor (TSM) and ASML Holding (ASML) were the top mega-caps of the day. Energy and Financial stocks were at the bottom, including Bank of America (BAC), Exxon Mobil (XOM), and JP Morgan (JPM). Communications companies AT&T (T) and Comcast Corp (CMCSA) were also at the bottom of the list.
Growth stocks popped again today. Leading the list were Chinese fintech companies Up Fintech (TIGR) and FUTU Holdings (FUTU) with +20.94% and 15.20% gains. GrowGeneration (GRWG) and Moderna (MRNA) also had gains of over 10%. 18 of the growth stocks in the daily update list gained over 5%. It's not meant to be an exhaustive list, but the point remains, there were a lot of big gainers today in growth stocks.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
On Thursday, an OPEC meeting is scheduled which will impact outlook for oil supply/demand. Initial Jobless Claims data will be released. Additional Manufacturing data for March will indicate how the sector is recovering.
Also keep in mind to characteristics for tomorrow. It's the beginning of a new quarter and a historically positive month for markets. It's also the last day of trading this week heading into a three-day weekend.
CarMax (KMX) reports on Thursday.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
The index moved above the 21d EMA in the morning and stayed above that line, despite the dip before close.
If the one-day trend line continues, we can expect a +1.02% gain for Thursday, and ending just under the 50d MA.
The five-day trend line points to a +0.42% gain.
The trend line from the 3/5 low points to a -0.36% loss, which is just below the 21d EMA.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
It was positive to see a good gain on higher volume today. The longer upper wick is reminiscent of the candle on 3/22 where I called an expectation of Higher for the next day. But the index dropped 3% over the next two days. So that gives me some caution in the expectation of Sideways or Higher for tomorrow.
There are some differences in the underlying characteristics of the 3/22 candle. The breadth in gains was not there for 3/22, with two declining stocks for every advancing stock. Today, we have more advancing stocks than declining stocks. The advances on 3/22 happened as treasury yields declined and investors seemed to be in and out of tech stocks based on the movement in yields. Today's rally in tech stocks happened despite higher yields.
The creation of the longer upper wick was the same, a sell-off into close after an intraday high. The catalyst this time has a few possibilities. Perhaps Yellen's announcement of more scrutiny on hedge funds stirred the market. But the impact of Microsoft's huge afternoon rally and then pullback can also be felt in the indexes. The timing of the rally and sell-off coincides with the rise in the Utilities sector, a sector that investors run to when their nervous.
So I'm bullish with caution for tomorrow. Let's look forward to a great first day of April. And market, don't make a fool out of me.
Stay healthy and trade safe!
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